**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

**x**
**        **
**Quarterly      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934      **

**OR**

**o**
** **
**Transition      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934**
** **

**Commission      File Number 001-14015**

**APPLIED      ENERGETICS, INC.**

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| **Delaware**                                                                 |   | **77-0262908**                                      |
|------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or Other Jurisdiction of Incorporation orOrganization) |   | (IRS                Employer Identification Number) |

| **3590                East Columbia Street**            |                      |
|---------------------------------------------------------|---------------------------|
| **Tucson,                Arizona**                      | **85714**                 |
| (Address                of Principal Executive Offices) | (Zip                Code) |

**Registrant’s      telephone number, including area code**
**(520)      628-7415**

| Large                accelerated filer: o | Accelerated                filer: x                                         | Non-accelerated                filer: o | Smaller                reporting company: o |
|-------------------------------------------|-----------------------------------------------------------------------------|-----------------------------------------|---------------------------------------------|
|                                      | (Do                not check if a smaller reporting                company) |

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| PART                  I -      | FINANCIAL                  INFORMATION                                                                                                                 |   |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                           |                                                                                                                                                   |   |
| Item                  1 -      | Consolidated                  Financial Statements                                                                                                     |   |
|                           |                                                                                                                                                   |   |
|                           | Consolidated                  Balance Sheets as of June 30, 2008 (Unaudited) and December 31,                  2007                                    | 1      |
|                           |                                                                                                                                                   |   |
|                           | Consolidated                  Statements of Operations for the three months ended June 30, 2008                  and 2007                  (Unaudited) | 2      |
|                           |                                                                                                                                                   |   |
|                           | Consolidated                  Statements of Operations for the six months ended June 30, 2008                  and 2007                  (Unaudited)   | 3      |
|                           |                                                                                                                                                   |   |
|                           | Consolidated                  Statements of Cash Flows for the six months ended June 30, 2008                  and 2007                  (Unaudited)   | 4      |
|                           |                                                                                                                                                   |   |
|                           | Notes                  to Consolidated Financial Statements                                                                                            | 5      |
|                           |                                                                                                                                                   |   |
| Item                  2 -      | Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations                                | 11     |
|                           |                                                                                                                                                   |   |
| Item                  4 -      | Controls                  and Procedures                                                                                                               | 14     |
|                           |                                                                                                                                                   |   |
| PART                  II -     | OTHER                  INFORMATION                                                                                                                     |   |
|                           |                                                                                                                                                   |   |
| Item                  2 -      | Unregistered                  Sales of Equity Securities and Use of Proceeds                                                                           | 15     |
|                           |                                                                                                                                                   |   |
| Item                  4 -      | Submission                  of Matters to a Vote of Security Holders                                                                                   | 15     |
|                           |                                                                                                                                                   |   |
| Item 5                  - | Other                Information                                                                                                                       | 15     |
|                           |                                                                                                                                                   |   |
| Item                  6 -      | Exhibits                                                                                                                                               | 15     |
|                           |                                                                                                                                                   |   |
| SIGNATURES                     | 16                                                                                                                                                     |

----

**PART      I FINANCIAL INFORMATION**

**ITEM      1. CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                                                                                                                                                                               |   | **June 30, 2008** |        | **December 31, 2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-------------|---------------------------------|--------|
|                                                                                                                                                                                                                                                                               |   | **(Unaudited)**             |        |                            |   |
| ASSETS                                                                                                                                                                                                                                                                             |   |                        |        |                            |   |   |   |
| Current                  assets                                                                                                                                                                                                                                                    |   |                        |        |                            |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                         |   | $                           | 8,021,845   |                            | $      | 14,981,192 |   |
| Accounts                  receivable                                                                                                                                                                                                                                               |   |                        | 5,330,634   |                            |   | 3,264,968 |   |
| Inventory                                                                                                                                                                                                                                                                          |   |                        | 1,991,403   |                            |   | 1,468,391 |   |
| Prepaid                  expenses and deposits                                                                                                                                                                                                                                     |   |                        | 231,142     |                            |   | 445,832 |   |
| Other                  receivables                                                                                                                                                                                                                                                 |   |                        | 126,931     |                            |   | 59,983 |   |
| Total                  current assets                                                                                                                                                                                                                                              |   |                        | 15,701,955  |                            |   | 20,220,366 |   |
| Securities                  available for sale                                                                                                                                                                                                                                     |   |                        | 7,125,000   |                            |   | 7,500,000 |   |
| Property                  and equipment - net                                                                                                                                                                                                                                      |   |                        | 3,528,310   |                            |   | 1,600,887 |   |
| Intangible                  assets - net                                                                                                                                                                                                                                           |   |                        | 61,500      |                            |   | 86,100 |   |
| Other                  assets                                                                                                                                                                                                                                                      |   |                        | 50,153      |                            |   | 59,517 |   |
| TOTAL                  ASSETS                                                                                                                                                                                                                                                      |   | $                           | 26,466,918  |                            | $      | 29,466,870 |   |
|                                                                                                                                                                                                                                                                               |   |                        |        |                            |   |  |   |
| LIABILITIES                  AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                        |   |                        |        |                            |   |   |   |
| Current                  liabilities                                                                                                                                                                                                                                               |   |                        |        |                            |   |   |   |
| Accounts                  payable                                                                                                                                                                                                                                                  |   | $                           | 589,233     |                            | $      | 1,148,266 |   |
| Accrued                  expenses                                                                                                                                                                                                                                                  |   |                        | 661,145     |                            |   | 516,589 |   |
| Accrued                  compensation                                                                                                                                                                                                                                              |   |                        | 706,814     |                            |   | 1,060,603 |   |
| Customer                  deposits                                                                                                                                                                                                                                                 |   |                        | 824,850     |                            |   | 936,373 |   |
| Billings                  in excess of costs                                                                                                                                                                                                                                       |   |                        | 197,455     |                            |   | - |   |
| Current                  portion of capital lease obligations                                                                                                                                                                                                                      |   |                        | 6,916       |                            |   | 13,937 |   |
| Total                  current liabilities                                                                                                                                                                                                                                         |   |                        | 2,986,413   |                            |   | 3,675,768 |   |
| Capital                  lease obligations                                                                                                                                                                                                                                         |   |                        | -           |                            |   | 2,028 |   |
| Deferred                  rent                                                                                                                                                                                                                                                     |   |                        | 5,787       |                            |   | 125,814 |   |
| Total                  liabilities                                                                                                                                                                                                                                                 |   |                        | 2,992,200   |                            |   | 3,803,610 |   |
|                                                                                                                                                                                                                                                                               |   |                        |        |                            |   |   |   |
| Commitments                  and contingencies                                                                                                                                                                                                                                     |   |                        |        |                            |   |   |   |
|                                                                                                                                                                                                                                                                               |   |                        |        |                            |   |   |   |
| Stockholders’                  equity                                                                                                                                                                                                                                        |   |                        |        |                            |   |   |   |
| Series                  A Convertible Preferred stock, $.001 par value, 2,000,000 shares                  authorized;                  678,000 shares issued and outstanding at June 30, 2008 and                  690,000 shares issued and outstanding at December 31, 2007 |   |                        | 678         |                            |   | 690 |   |
| Common                  stock, $.001 par value, 125,000,000 shares authorized;  80,622,710                  shares issued and outstanding at June 30, 2008 and 80,244,617                  shares issued and outstanding at December 31, 2007                                 |   |                        | 80,623      |                            |   | 80,245 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                        |   |                        | 68,941,062  |                            |   | 66,344,066 |   |
| Accumulated                  deficit                                                                                                                                                                                                                                               |   |                        | (45,172,645 | )                               |   | (40,761,741 | ) |
| Accumulated                  other comprehensive loss                                                                                                                                                                                                                              |   |                        | (375,000    | )                               |   | - |   |
| Total                  stockholders’ equity                                                                                                                                                                                                                                  |   |                        | 23,474,718  |                            |   | 25,663,260 |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                  |   | $                           | 26,466,918  |                            | $      | 29,466,870 |   |

----

APPLIED        ENERGETICS, INC.

|                                                                              |   | For the three months endedJune 30, |       |
|-----------------------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|
|                                                                              |   | 2008                                                        |       | 2007 |   |
|                                                                              |   |                                                        |       |   |   |
| Revenue                                                                           |   | $                                                           | 5,677,998  |   | $ | 3,149,173 |   |
|                                                                              |   |                                                        |       |   |   |   |   |
| Cost                  of revenue                                                  |   |                                                        | 5,189,454  |   |   | 3,135,603 |   |
|                                                                              |   |                                                        |       |   |   |   |   |
| Gross                  profit                                                     |   |                                                        | 488,544    |   |   | 13,570 |   |
|                                                                              |   |                                                        |       |   |   |   |   |
| Operating                  expenses:                                              |   |                                                        |       |   |   |   |   |
| General                  and administrative                                       |   |                                                        | 1,157,277  |   |   | 2,317,578 |   |
| Selling                  and marketing                                            |   |                                                        | 72,854     |   |   | 125,015 |   |
| Research                  and development                                         |   |                                                        | 243,272    |   |   | 183,804 |   |
| Total                  operating expenses                                         |   |                                                        | 1,473,403  |   |   | 2,626,397 |   |
|                                                                              |   |                                                        |       |   |   |   |   |
| Operating                  loss                                                   |   |                                                        | (984,859   | ) |   | (2,612,827 | ) |
|                                                                              |   |                                                        |       |   |   |   |   |
| Other                  (expense) income                                           |   |                                                        |       |   |   |   |   |
| Interest                  expense                                                 |   |                                                        | (239       | ) |   | (489 | ) |
| Interest                  income                                                  |   |                                                        | 165,780    |   |   | 354,143 |   |
| Other                                                                             |   |                                                        | -          |   |   | 7,835 |   |
| Total                  other                                                      |   |                                                        | 165,541    |   |   | 361,489 |   |
|                                                                              |   |                                                        |       |   |   |   |   |
| Net                  loss                                                         |   |                                                        | (819,318   | ) |   | (2,251,338 | ) |
|                                                                              |   |                                                        |       |   |   |   |   |
| Preferred                  stock dividends                                        |   |                                                        | (282,220   | ) |   | (295,105 | ) |
|                                                                              |   |                                                        |       |   |   |   |   |
| Net                  loss attributable to common stockholders                     |   | $                                                           | (1,101,538 | ) | $ | (2,546,443 | ) |
|                                                                              |   |                                                        |       |   |   |   |   |
| Net                  loss per common share – basic and diluted         |   | $                                                           | (0.01      | ) | $ | (0.03 | ) |
|                                                                              |   |                                                        |       |   |   |   |   |
| Weighted                  average number of shares outstanding, basic and diluted |   |                                                        | 80,594,626 |   |   | 78,741,988 |   |

----

| APPLIED                  ENERGETICS, INC.                                                                 |   |
|-----------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED                  STATEMENTS OF OPERATIONS                                                    |   |
| (Unaudited)                                                                                               |   |
|                                                                                                      |   |   |   |   |   |
|                                                                                                      |   | For the six months endedJune 30, |   |
|                                                                                                      |   | 2008 |   | 2007 |   |
|                                                                                                      |   |   |   |   |   |
| Revenue                                                                                                   |   | $ | 7,639,088 |   | $ | 5,219,783 |   |
|                                                                                                      |   |   |   |   |   |   |   |
| Cost                  of revenue                                                                          |   |   | 6,929,562 |   |   | 5,347,512 |   |
|                                                                                                      |   |   |   |   |   |   |   |
| Gross                  profit (loss)                                                                      |   |   | 709,526 |   |   | (127,729 | ) |
|                                                                                                      |   |   |   |   |   |   |   |
| Operating                  expenses:                                                                      |   |   |   |   |   |   |   |
| General                  and administrative                                                               |   |   | 4,522,741 |   |   | 4,663,285 |   |
| Selling                  and marketing                                                                    |   |   | 111,438 |   |   | 254,815 |   |
| Research                  and development                                                                 |   |   | 605,210 |   |   | 307,827 |   |
| Total                  operating expenses                                                                 |   |   | 5,239,389 |   |   | 5,225,927 |   |
|                                                                                                      |   |   |   |   |   |   |   |
| Operating                  loss                                                                           |   |   | (4,529,863 | ) |   | (5,353,656 | ) |
|                                                                                                      |   |   |   |   |   |   |   |
| Other                  (expense) income                                                                   |   |   |   |   |   |   |   |
| Interest                  expense                                                                         |   |   | (1,552 | ) |   | (1,488 | ) |
| Interest                  income                                                                          |   |   | 415,608 |   |   | 737,969 |   |
| Other                                                                                                     |   |   | 10 |   |   | 7,847 |   |
| Total                  other                                                                              |   |   | 414,066 |   |   | 744,328 |   |
|                                                                                                      |   |   |   |   |   |   |   |
| Net                  loss                                                                                 |   |   | (4,115,797 | ) |   | (4,609,328 | ) |
|                                                                                                      |   |   |   |   |   |   |   |
| Preferred                  stock dividends                                                                |   |   | (577,311 | ) |   | (590,221 | ) |
|                                                                                                      |   |   |   |   |   |   |   |
| Net                  loss attributable to common stockholders                                             |   | $ | (4,693,108 | ) | $ | (5,199,549 | ) |
|                                                                                                      |   |   |   |   |   |   |   |
| Net                  loss per common share – basic and diluted                                 |   | $ | (0.06 | ) | $ | (0.07 | ) |
|                                                                                                      |   |   |   |   |   |   |   |
| Weighted                  average number of shares outstanding, basic and diluted                         |   |   | 80,499,620 |   |   | 78,458,508 |   |
|                                                                                                      |   |   |   |   |   |   |   |
| See                  accompanying notes to consolidated financial statements                  (unaudited) |

----

(Unaudited)

|                                                                                                              |   | For the six months endedJune 30, |       |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|------------|
|                                                                                                              |   | 2008                                                      |       | 2007 |   |
| CASH                    FLOWS FROM OPERATING ACTIVITIES:                                                          |   |                                                      |       |   |   |   |   |
| Net                    loss                                                                                       |   | $                                                         | (4,115,797 | ) | $ | (4,609,328 | ) |
| Adjustments                    to reconcile net loss to net cash used in operating                    activities: |   |                                                      |       |   |   |   |   |
| Depreciation                    and amortization                                                                  |   |                                                      | 480,206    |   |   | 541,706 |   |
| Loss                    on equipment disposal                                                                     |   |                                                      | -          |   |   | 4,504 |   |
| Deferred                    rent adjustment on purchase of premises                                               |   |                                                      | 118,594    |   |   | - |   |
| Provision                    for losses on projects                                                               |   |                                                      | -          |   |   | 286,247 |   |
| Non-cash                    stock based compensation expense                                                      |   |                                                      | 2,302,255  |   |   | 1,785,297 |   |
| Changes                    in assets and liabilities:                                                             |   |                                                      |       |   |   |   |   |
| Accounts                    receivable                                                                            |   |                                                      | (2,065,666 | ) |   | (493,896 | ) |
| Other                    receivable                                                                               |   |                                                      | (66,948    | ) |   | (1,647 | ) |
| Inventory                                                                                                         |   |                                                      | (523,012   | ) |   | (1,490,016 | ) |
| Prepaid                    expenses and deposits                                                                  |   |                                                      | 224,054    |   |   | 385,521 |   |
| Accounts                    payable                                                                               |   |                                                      | (559,033   | ) |   | 236,408 |   |
| Billings                    in excess of costs                                                                    |   |                                                      | 197,455    |   |   | - |   |
| Accrued                    expenses, deposits and deferred rent                                                   |   |                                                      | (440,783   | ) |   | (495,574 | ) |
| Net                    cash used in operating activities                                                          |   |                                                      | (4,448,675 | ) |   | (3,850,778 | ) |
| CASH                    FLOWS FROM INVESTING ACTIVITIES:                                                          |   |                                                      |       |   |   |   |   |
| Purchase                    of land, building and equipment                                                       |   |                                                      | (2,501,623 | ) |   | (136,849 | ) |
| Proceeds                    from disposal of equipment                                                            |   |                                                      | -          |   |   | 17,180 |   |
| Net                    cash used in investing activities                                                          |   |                                                      | (2,501,623 | ) |   | (119,669 | ) |
|                                                                                                              |   |                                                      |       |   |   |   |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES:                                                          |   |                                                      |       |   |   |   |   |
|                                                                                                              |   |                                                      |       |   |   |   |   |
| Principal                    payments on capital lease obligations                                                |   |                                                      | (9,049     | ) |   | (49,755 | ) |
| Net                    cash used in financing activities                                                          |   |                                                      | (9,049     | ) |   | (49,755 | ) |
|                                                                                                              |   |                                                      |       |   |   |   |   |
| Net                    decrease in cash and cash equivalents                                                      |   |                                                      | (6,959,347 | ) |   | (4,020,202 | ) |
|                                                                                                              |   |                                                      |       |   |   |   |   |
| Cash                    and cash equivalents, beginning of period                                                 |   |                                                      | 14,981,192 |   |   | 22,123,792 |   |
|                                                                                                              |   |                                                      |       |   |   |   |   |
| Cash                    and cash equivalents, end of period                                                       |   | $                                                         | 8,021,845  |   | $ | 18,103,590 |   |
|                                                                                                              |   |                                                      |       |   |   |   |   |
|                                                                                                              |   |                                                      |       |   |   |   |   |
| See                    supplemental cash flow information at note 12                                              |   |                                                      |       |   |   |   |   |

----

**1.           **
**BASIS          OF PRESENTATION**

**USE      OF ESTIMATES**

**RECENT      ACCOUNTING PRONOUNCEMENTS**

**2.**
**ACCOUNTS      RECEIVABLE**

|                                                                   |   | June 30, 2008 |               | December 31, 2007 |   |
|------------------------------------------------------------------------|--------|-------------------------|--------------------|-----------------------------|--------|
|                                                                   |   |                    |               |                        |   |
| Contracts                  receivable                                  |   | $                       | 3,727,198          |                        | $      | 1,734,140 |   |
| Costs                  and estimated earnings on uncompleted contracts |   |                    | 1,603,436          |                        |   | 1,530,828 |   |
|                                                                   |   |                    |     |                        |   |    |   |
| Total                                                                  |   | $                       | 5,330,634          |                        | $      | 3,264,968 |   |

----

|                                                                                                                                                                |   | June 30, 2008 |       | December 31, 2007 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|-----------------------------|--------|
|                                                                                                                                                                |   |                    |       |                        |   |
| Costs                        incurred on uncompleted contracts                                                                                                      |   | $                       | 17,409,179 |                        | $      | 10,881,465 |   |
| Estimated                        earnings                                                                                                                           |   |                    | 1,335,928  |                        |   | 829,764 |   |
|                                                                                                                                                                |   |                    |       |                        |   |   |   |
| Total                        billable costs and estimated earnings                                                                                                  |   |                    | 18,745,107 |                        |   | 11,711,229 |   |
| Less:                                                                                                                                                               |   |                    |       |                        |   |   |   |
| Billings                        to date                                                                                                                             |   |                    | 17,339,126 |                        |   | 10,180,401 |   |
|                                                                                                                                                                |   |                    |       |                        |   |   |   |
| Total                                                                                                                                                               |   | $                       | 1,405,981  |                        | $      | 1,530,828 |   |
|                                                                                                                                                                |   |                    |       |                        |   |   |   |
| Included                        in accompanying balance sheet**:**                                                                                                  |   |                    |       |                        |   |   |   |
|                                                                                                                                                                |   |                    |       |                        |   |   |   |
| Unbilled                        costs and estimated earnings on uncompleted contracts included                        in accounts                        receivable |   |                    |       |                        |   |   |   |
|                                                                                                                                                                |   | $                       | 1,603,436  |                        | $      | 1,530,828 |   |
| Billings                        in excess of costs and estimated earnings on uncompleted                        contracts                                           |   |                    | (197,455   | )                           |   | - |   |
|                                                                                                                                                                |   |                    |            |                        |   |  |   |
| Total                                                                                                                                                               |   | $                       | 1,405,981  |                        | $      | 1,530,828 |   |
|                                                                                                                                                                |   |                    |       |                        |   |   |   |

**3.**
**INVENTORY**

|                           |   | June 30, 2008 |      | December 31, 2007 |   |
|--------------------------------|--------|-------------------------|-----------|-----------------------------|--------|
| Raw                  materials |   | $                       | 369,270   |                        | $      | 213,645 |   |
| Work-in-process                |   |                    | 1,622,133 |                        |   | 1,254,746 |   |
|                           |   |                    |      |                        |   |   |   |
| Total                          |   | $                       | 1,991,403 |                        | $      | 1,468,391 |   |

**4.**
**SECURITIES      AVAILABLE FOR SALE**

|  | · | Defines                fair value as the price that would be received to sell an asset or                paid to                transfer a liability in an orderly transaction between market participants                at the measurement date; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Establishes                a three-level hierarchy (“Valuation Hierarchy”) for fair value                measurements; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Requires                consideration of the Company’s creditworthiness when valuing liabilities;                and |
|--|--------|----------------------------------------------------------------------------------------------------------------------------|

|  | · | Expands                disclosures about instruments measured at fair                value. |
|--|--------|---------------------------------------------------------------------------------------------|

|  | · | Level                1 – inputs to the valuation methodology are quoted prices                (unadjusted) for identical assets or liabilities in active                markets. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | Level                2 – inputs to the valuation methodology include quoted prices for                similar assets and liabilities in active markets, and inputs that                are                observable for the asset or liability, either directly or indirectly,                for                substantially the full term of the financial instrument. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Level                3 – inputs to the valuation methodology are unobservable and                significant to the fair value measurement. See below for further                discussion of the Company’s level 3 fair value                measurements. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | Asset Backed Securities |      |
|-------------------------------------------------------|--------|-----------------------------------|-----------|
| Fair                  value December 31, 2007         |   | $                                 | 7,500,000 |   |
|                                                  |   |                              |      |   |
| Unrealized                  losses - 1st quarter 2008 |   |                              | (375,000  | ) |
|                                                  |   |                              |      |   |
| Fair                  value June 30, 2008             |   | $                                 | 7,125,000 |   |

**5.**
**PROPERTY      AND EQUIPMENT**

----

|                                                            |   | June 30, 2008 |       | December 31, 2007 |   |
|-----------------------------------------------------------------|--------|-------------------------|------------|-----------------------------|--------|
|                                                            |   |                    |       |                        |   |
| Land                  and buildings                             |   | $                       | 2,072,215  |                        | $      | - |   |
|                                                            |   |                    |       |                        |   |   |   |
| Equipment                                                       |   |                    | 2,971,079  |                        |   | 2,717,940 |   |
|                                                            |   |                    |       |                        |   |   |   |
| Furniture                  and building improvements            |   |                    | 1,061,698  |                        |   | 1,036,178 |   |
|                                                            |   |                    |       |                        |   |   |   |
| Software                                                        |   |                    | 784,361    |                        |   | 753,947 |   |
|                                                            |   |                    |       |                        |   |   |   |
| Total                                                           |   |                    | 6,889,353  |                        |   | 4,508,065 |   |
|                                                            |   |                    |       |                        |   |   |   |
| Less                  accumulated depreciation and amortization |   |                    | (3,361,043 | )                           |   | (2,907,178 | ) |
|                                                            |   |                    |       |                        |   |   |   |
| Net                  property and equipment                     |   | $                       | 3,528,310  |                        | $      | 1,600,887 |   |

**6.**
**STOCK-BASED      COMPENSATION**

|                                                                  |   | Six                  Months Ended June 30, |                     |
|-----------------------------------------------------------------------|--------|--------------------------------------------|--------------------------|
|                                                                  |   | 2008                                       |                     | 2007 |   |
| Expected                  life (years)                                |   |                                       | 4                  years |   |   | 4                  years |   |
| Dividend                  yield                                       |   |                                       | 0.0                      | % |   | 0.0 | % |
| Expected                  volatility                                  |   |                                       | 65.0                     | % |   | 46.0 | % |
| Risk                  free interest rates                             |   |                                       | 2.4                      | % |   | 4.7 | % |
| Weighted                  average fair value of options at grant date |   | $                                          | 2.20                     |   | $ | 2.23 |   |

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**7.**
**COMPREHENSIVE      LOSS**

|                                                              |   | Three Months Ended June 30, |     | Six Months Ended June 30, |   |
|-------------------------------------------------------------------|--------|-------------------------------------------------|----------|-----------------------------------------------|--------|
|                                                              |   | 2008                                            |     | 2007                                          |   | 2008 |   | 2007 |   |
|                                                              |   |                                            |     |                                          |   |   |   |   |   |
| Comprehensive                  Loss                               |   |                                            |     |                                          |   |   |   |   |   |   |   |   |   |
| Net                  loss                                         |   | $                                               | (819,318 | )                                             | $      | (2,251,338 | ) | $ | (4,115,797 | ) | $ | (4,609,328 | ) |
| Other                  comprehensive loss:                        |   |                                            |     |                                          |   |   |   |   |   |   |   |   |   |
| Unrealized                  loss on available-for-sale securities |   |                                            | -        |                                          |   | - |   |   | (375,000 | ) |   | - |   |
|                                                              |   |                                            |     |                                          |   |   |   |   |   |   |   |   |   |
| Total                                                             |   | $                                               | (819,318 | )                                             | $      | (2,251,338 | ) | $ | (4,490,797 | ) | $ | (4,609,328 | ) |

|                                                                         |   | June 30, 2008 |               | December 31, 2007 |   |
|------------------------------------------------------------------------------|--------|-------------------------|--------------------|-----------------------------|--------|
|                                                                         |   |                    |               |                        |   |
| Cumulative                  unrealized loss on available-for-sale securities |   | $                       | (375,000           | )                           | $      | - |   |
|                                                                         |   |                    |     |                        |   |   |   |
|                                                                         |   |                    |               |                        |   |   |   |
| Total                  accumulated other comprehensive loss                  |   | $                       | (375,000           | )                           | $      | - |   |

**8.**
**SIGNIFICANT      CUSTOMERS**

**9.**
**NET      LOSS PER SHARE**

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**10.**
**DIVIDENDS**

**11.          **
**COMMITMENTS          AND CONTINGENCIES**

**LITIGATION**

**12.          **
**SUPPLEMENTAL          CASH FLOW INFORMATION**

|                                              |   | Six Months Ended June 30, |   |
|---------------------------------------------------|--------|-----------------------------------------------|--------|
|                                              |   | 2008                                          |   | 2007 |   |
| Cash                  paid during the period for: |   |                                          |   |   |   |   |   |
| Interest                                          |   | $                                             | 1,552  |   | $ | 5,243 |   |
| Income                  taxes                     |   | $                                             | -      |   | $ | - |   |

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**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS**

**CAUTIONARY      NOTE REGARDING FORWARD-LOOKING STATEMENTS**

**OVERVIEW**

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**RESULTS      OF OPERATIONS**

**COMPARISON      OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007 IS AS      FOLLOWS:**

|                                      |   | 2008   |      | 2007   |   |
|-------------------------------------------|--------|--------|-----------|--------|--------|
| Revenue                                   |   | $      | 5,677,998 |   | $      | 3,149,173 |   |
| Cost                of revenue            |   |   | 5,189,454 |   |   | 3,135,603 |   |
| General                and administrative |   |   | 1,157,277 |   |   | 2,317,578 |   |
| Selling                and marketing      |   |   | 72,854    |   |   | 125,015 |   |
| Research                and development   |   |   | 243,272   |   |   | 183,804 |   |
| Other                (expense) income:    |   |   |      |   |   |   |   |
| Interest                expense           |   |   | (239      | )      |   | (489 | ) |
| Interest                income            |   |   | 165,780   |   |   | 354,143 |   |
| Other                                     |   |   | -         |   |   | 7,835 |   |
|                                      |   |   |      |   |   |   |   |
| Net                loss                   |   | $      | (819,318  | )      | $      | (2,251,338 | ) |

**REVENUE**

**COST      OF REVENUE**

**GENERAL      AND ADMINISTRATIVE**

**SELLING      AND MARKETING**

**RESEARCH      AND DEVELOPMENT**

**INTEREST      INCOME AND INTEREST EXPENSE**

**NET      LOSS**

----

**COMPARISON      OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007 IS AS      FOLLOWS:**

|                                        |   | 2008   |       | 2007   |   |
|---------------------------------------------|--------|--------|------------|--------|--------|
| Revenue                                     |   | $      | 7,639,088  |   | $      | 5,219,783 |   |
| Cost                  of revenue            |   |   | 6,929,562  |   |   | 5,347,512 |   |
| General                  and administrative |   |   | 4,522,741  |   |   | 4,663,285 |   |
| Selling                  and marketing      |   |   | 111,438    |   |   | 254,815 |   |
| Research                  and development   |   |   | 605,210    |   |   | 307,827 |   |
| Other                  (expense) income:    |   |   |       |   |   |   |   |
| Interest                  expense           |   |   | (1,552     | )      |   | (1,488 | ) |
| Interest                  income            |   |   | 415,608    |   |   | 737,969 |   |
| Other                                       |   |   | 10         |   |   | 7,847 |   |
|                                        |   |   |       |   |   |   |   |
| Net                  loss                   |   | $      | (4,115,797 | )      | $      | (4,609,328 | ) |

**REVENUE**

**COST      OF REVENUE**

**GENERAL      AND ADMINISTRATIVE**

**SELLING      AND MARKETING**

**RESEARCH      AND DEVELOPMENT**

**INTEREST      INCOME AND INTEREST EXPENSE**

----

**NET      LOSS**

**LIQUIDITY      AND CAPITAL RESOURCES**

**BACKLOG      OF ORDERS**

**ITEM      4. CONTROLS AND PROCEDURES**

**EVALUATION      OF DISCLOSURE CONTROLS AND PROCEDURES**

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**PART      II – OTHER INFORMATION**

**ITEM      2**
**UNREGISTERED      SALE OF SECURITIES AND USE OF PROCEEDS**

**ITEM      4.**
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      5.**
**OTHER      INFORMATION**

**ITEM      6.**
**EXHIBITS**

| EXHIBITNUMBER | DESCRIPTION                                                                                                                                                                                                                                          |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                 |
| 31.1          | Certification                of Chief Executive pursuant to Rule 13a-14 or 15d-14 of the Securities                Exchange Act of 1934, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002.                        |
|          |                                                                                                                                                                                                                                                 |
| 31.2          | Certification                of Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the                Securities Exchange Act of 1934, as adopted pursuant to Section 302                of the                Sarbanes-Oxley Act of 2002. |
|          |                                                                                                                                                                                                                                                 |
| 32.1          | Chief                Executive Officer Certification pursuant to 18 U.S.C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                2002.                                          |
|          |                                                                                                                                                                                                                                                 |
| 32.2          | Chief                Financial Officer Certification pursuant to 18 U.S.C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                2002.                                          |
|          |                                                                                                                                                                                                                                                 |
| 99.1          | Press                release issued by Applied Energetics, Inc. on August 11,                2008.                                                                                                                                                   |

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**SIGNATURES      **

|   | **APPLIED                ENERGETICS, INC.**          |
|--------|------------------------------------------------------|
|   |                                                 |
| By     | /s/                Dana A. Marshall                  |
|   | Dana                A. Marshall                      |
|   | Chief                Executive Officer and President |

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